Study offers ideas to combat growth of trade fraud

On behalf of Arthur Aidala of Aidala Bertuna & Kamins posted in White Collar Crimes on Tuesday July 31, 2018.

Companies in New York that import fake merchandise or falsify records to avoid paying import duties generally have the upper hand with authorities. The sheer scale of imports entering the country makes comprehensive inspections nearly impossible, according to a recent study that examined trade fraud. Every year, $2.71 trillion worth of products enter the country. Researchers analyzed federal prosecutions of importers between 2000 and 2016 and calculated that prosecutions had increased by 900 percent. Their study concluded that cooperation among federal agencies and increased prosecution under the False Claims Act might hold more importers accountable.

The FCA imposes harsh penalties, including treble damages, upon actors found guilty of importing fraudulent goods. Crimes committed by importers include bringing in fake pharmaceuticals or falsely labeled food products, like calling Vietnamese catfish pumped full of antibiotics flounder or grouper. Trade fraud can also impact U.S. companies as was the case of a domestic lighting company undermined by a competitor that imported cheaper Chinese equipment while lying about the country of origin to avoid taxes.

The study recommended that federal agencies that monitor the border and trade share information with central databases that could enable investigators to identify more evidence. A central system for international shipping records could improve surveillance as well. Additional U.S. attorneys trained to fight trade fraud could also support the enforcement effort.

Trade fraud typically includes records from multiple companies and numerous electronic transactions. A person named in an investigation might develop a defense against accusations of white-collar crimes by consulting an attorney. Legal counsel might review the evidence and challenge claims from prosecutors that the defendant knowingly participated in the alleged crimes. If evidence lacks a clear association with the alleged offender, then an attorney might get charges dropped or negotiate a lenient plea deal.